What is an offshore investment bond?

My financial adviser has recommended that I use an offshore investment bond, but I'm not sure what they are. What are offshore investment bonds?

An offshore investment bond is a tax wrapper that can provide tax benefits for expats and non-residents. While they can be complex investment products and normally only available to sophisticated investors, they are regularly sold by offshore financial advisers as part of a pension wrapper such as a QROPS or a SIPP.

Offshore bonds are normally life insurance products, provided by global insurance companies such as Royal London or Old Mutual.

Held within an offshore investment bond is a variety of underlying investment options, including stocks, shares, mutual funds and other financial products. Offshore bonds maybe either highly personalised (where the investor can invest in almost any kind of financial product within the bond) or a collective offshore bond (where the underlying investment options are limited to financial products approved by the bond provider).

The bond is called an “offshore bond” because it is held in an offshore jurisdiction, such as the Isle of Mann, Jersey, Malta, Gibraltar, among others and is subject to the tax rules of that specific jurisdiction. In some cases, the offshore bond can increase it’s capital free of tax, and the investor may only be subject to income tax when they withdraw funds from the investment.

Offshore bonds have been traditionally misused by unscrupulous offshore advisers using them to hide fees and commissions to make the investments look more lucrative for expats and non-residents.

Providing the investor is provided with full details of the investment and the adviser is operating on a fee only basis, with charges clearly detailed in advance, offshore bonds can offer expats a highly beneficial, tax efficient investment option.

INVESTOR WARNING: An investor should never agree to an offshore bond if they are not sure about the underlying investments, tax implications or fees/charges/commissions of the bond. Nobody should make a decision about an offshore bond, or any other financial investment, without seeking professional advice from a qualified independent financial adviser or wealth manager.

For a more detailed explanation of Offshore Investment Bonds, please read our guide created specifically for UK non-residents and British expats.

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Last updated: 17 October 2018

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